Bottom Shekel / An Accounting of the Soul, Under Threat

Israel's economic leaders need to correctly identify the worst of the global threats, and to devise ways of deflecting them.

Israel comes to Yom Kippur 5772 after four highly unusual months, during which a somnolent majority woke up and began to loudly protest its lot. And this happened just as the global economy began to judder again, heading - it can now be said with certainty - into another recession.

The ripples from the crises shaking Europe and the United States will inevitably reach Israel in the near future. In the shadow of this black cloud spreading toward us from the west, Israel's economic leaders need to correctly identify the worst of the global threats, and to devise ways of deflecting them. But no less importantly, they need to identify the worst of the threats right here at home. They need to identify what Israelis need most, and they need to think of solutions.

Emil Salman

The worst thing they could do now is hunker down in a mental bunker and pour cold water over reforms, on the ostensible grounds that this isn't a good time.

This is the perfect time.

This is also the perfect time to do some soul-searching with respect to some of the burning issues of the day.

The Trajtenberg report

One might think that everything that can be said about the Trajtenberg committee has already been said - that it has nothing concrete to offer, that it proposes too much. That it's too broad and whole sections of the committee's recommendations should be scrapped, and that whole areas have been neglected and must be added.

One could continue picking at the Trajtenberg report, which is a study of what the state could do to better the lot of the people, for many moons. One could nitpick ad infinitum. One could shepherd it from the Knesset Economic Affairs Committee to the Knesset Finance Committee and back again and finally, one could bury it at midnight, leaving no trace.

Or one could look at the report, which was prepared at light speed, as the first payment - and not the last - to the grassroots protest movement that erupted four months ago. One could decide that the report aims to meet some of the needs that were raised in recent months. One could realize that the report is the starting point for great processes that will change national priorities, strengthen the weakest members of society and the middle class as well. And just as importantly, one could recognize the report's contribution to strengthening the business sector, boosting competition and creating opportunity.

A coalition has been forming in opposition to the Trajtenberg report. It includes politicians, business monopolies, and other powerful sectors such as the Histadrut labor federation and even the protest leaders themselves, who feel it didn't answer their issues. If this coalition is allowed to bury the report, it will be a hideous loss of opportunity. Given the state of the economy in Israel and the world, the best thing at this stage is to forge ahead: Accept the achievements the report has already marked up, and view it as a guiding star, leading to future achievements.

The medical residents

It is challenging to empathize with the medical residents as they struggle on, prepared to pay the personal price of losing their jobs rather than compromise on their principles. It is true that doctors have plenty of employment opportunities around the world, but it's a personal price of a magnitude that Israelis haven't seen before in the various labor battles that take place here day in and day out. Take the Israel Electric Corporation workers, who when restless usually threaten to pull the plug on the whole nation and throw it into darkness - everyone would suffer but them. Here, doctors are placing their own positions on the line.

But they are causing tremendous damage on the way, both to Israel's health-care system and to the cause of labor relations. With all due sympathy for their woes, capitulating to their demands - after the union representing them, the Israel Medical Association, signed a nine-year agreement with the Finance Ministry - would destroy the fiber of labor relations (and collective employment agreements ) in Israel. The doctors don't like the agreement but that's the agreement that was reached and signed on.

It is therefore little surprise that the loudest opponent to capitulation is none other than Histadrut chairman Ofer Eini.

Eini understands well that if the Finance Ministry gives up and quails before the residents, it will render all other collective employment agreements between government and unions meaningless. Eini knows that letting the residents prevail over the Finance Ministry would trigger a wave of demands by sectors and sub-sectors of workers unsatisfied with the achievements the unions representing them have delivered.

The Finance Ministry is worried, with good reason, that capitulating to the residents would create anarchy.

The residents haven't explained how their actions will not have that effect. All right, maybe that isn't their job, but if the rule in negotiation is to try to understand how the other party thinks, then this is a critical point.

The Finance Ministry's insistence that the agreement struck with the residents' representative union may not be reopened is important, not because of NIS 100 million or NIS 200 million a year here or there; but because of the implications for labor relations in Israel.

Ofer Eini, union chief

As for Ofer Eini, the erosion of his status began when the Labor Party stalked out of the coalition and then split into two factions. The erosion of his status continued when the social grassroots protest began to rise, and had nothing to do with the Histadrut. Now his status is being tested again, thanks to the medical residents. It is therefore no shock that at this time, and under these circumstances, Eini has chosen to declare a labor dispute starting next week. His cause du jour: ending the practice of both government and business of using temporary workers.

No question about it, temps have inferior status. They are exploited. They are at the bottom of the labor market ladder.

Undoubtedly, the use of temporary workers hired through manpower agencies has created distortions. Manpower companies retain too much of the money paid for their services, and give the workers too small a share. Other rights tend to get trampled too. Something definitely needs to be done about improving their lot.

But wait a moment. If the subject at stake is the accounting of the soul ahead of the Day of Atonement, perhaps one should ask Eini and the Histadrut how this downtrodden, lowly sub-sect of temps arose? How did it happen that businesses and government commonly employ temps from manpower agencies under substandard employment terms? And how on earth did a second generation of temps arise at these manpower agencies?

The Histadrut and powerful unions in Israel bear much responsibility for all these ills. For years and years the Histadrut and the unions let big businesses and the government form this subclass in the labor market. Why? That is how they stymied cutbacks that could harm tenured workers, living the life of Riley in the embrace of their cushy collective employment agreements.

That was the deal that the Histadrut and the powerful unions concocted with big business, a deal relying on perks aplenty for tenured workers (including raises during recessions, and absolute protection from dismissal ). But somebody has go to when an ax is waving around and efficiency measures are called for: thus the subclass of temps was created and perpetuated. It's a jungle, pure and simple: The temps get miserable pay, exploitative terms and zero job security.

Temps are the bastard children of the Histadrut and powerful unions, who utterly refused to give an inch for the greater good. Nor could they look these invisible people working for a pittance in the eye.

Eini may beat his breast and act to better the lot of the unhappy temps, first and second generation, but let him have no illusions: The only way to do it is to bring more flexibility and rationality into collective employment agreements, which sometimes seem like figments from la-la land, not serious contracts.

The banks

After years of complaining about their fees, banks have had a break in the last few months, mainly because the public's outrage found other targets - housing prices, the cost of living, cottage cheese and so on.

Meanwhile, around the world, the banks have been in a state of uproar that began when Lehman Bros. imploded three years ago, forcing governments to inject hundreds of billions of dollars into the banks to shore them up.

One outcome of the crisis was that the banks of the world sheltered down in bunkers. They scaled back lending, which meant that instead of providing oxygen to business and to economic growth, they were busy putting their wagons in a circle.

So much for Europe and the United States. Over here, our banks never reached such dire straits for a number of reasons. But now they have to strengthen their capital base, the Bank of Israel says, like their peers overseas.

Strengthening their capital base is another way of saying, ensuring their stability. Under some conditions, that indeed could mean they lend less to businesses. The Bank of Israel just mentioned its plan to require banks to beef up their capital base and horror scenarios immediately began to float, about a credit crunch and so on.

The bottom line is that the actions the Bank of Israel has taken so far have helped Israel's banks skip above the global hurricane. The process of strengthening their capital base could have casualties. Shareholders will have to settle for more modest dividends and big business borrowers may have to lower their leverage. But who will benefit?

Just about everybody. Banks will be stronger, bankers will have less risk to contend with, and smaller borrowers will become more desirable as far as the banks are concerned, because the banks will prefer to diversify their lending among greater numbers of smaller borrowers, not lend the lion's share to a small group of enormous borrowers, with all the risk that entails.